The worst telco isn't even a full-fledged telecommunications provider. Rather, DISH Network (NASDAQ:DISH) is a satellite-TV operator that, for me at least, provides:
- A lousy, overpriced product.
- Poor customer service.
Others say that DISH doesn't have the services to attract high-margin clients. "DISH has always gone for the bottom barrel customers and the current economic downturn is impacting that segment the most," wrote CAPS investor Ficus55 in April. "Also, in order to compete with the quality of other providers (cable, FiOS, DTV) huge infrastructure investments would be required. This company is a dud."
Ma Bell apparently agrees. AT&T (NYSE:T) recently switched to satellite peer DirecTV (NASDAQ:DTV) and will market its phone and Internet services as a bundle for DirecTV's customers.
Interestingly, this isn't the first time we've seen this. DirecTV is partnered up with all of the major U.S. telcos, including Verizon (NYSE:VZ), Sprint Nextel (NYSE:S), and DISH's hometown phone company, Qwest (NYSE:Q), The Wall Street Journal reports. DISH, as you might expect, has no equivalent deals.
But that's not why I'll be shorting DISH in our Motley Fool CAPS investor intelligence database today. Why, then? I'm concerned about its balance sheet, which includes hundreds of millions of dollars of convertible debt that Ma Bell had wanted DISH to buy back. It didn't.
Today, DISH Network carries roughly $6.5 billion in debt, charging between 3% and 8%. DirecTV, by contrast, doesn't carry a convertible, but has $6.1 billion in debt, charging between 6% and 8.4%. Sound similar? Yes, but DirecTV wins here, too, because it has nearly twice the cash that DISH does.
Balance sheets still matter. DirecTV has a decent one, DISH Network doesn't, and I think that shareholders, sadly, will pay the price. Do you agree? Disagree? Let us know by signing up for CAPS today. It's 100% free to participate.
Get your clicks with related Foolishness:
- One Foolish colleague foresaw how the credit crisis would benefit DirecTV.
- Another saw DISH leaking in May.
